Swiss Banking Regulations: A Primer
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As part of our ongoing coverage of financial regulations across the globe, we take a closer look at the Swiss banking system and the various laws and regulations that govern it. From liquidity requirements to consumer credit rules, Switzerland’s regulatory framework is designed to ensure stability and protection for its citizens.
Liquidity Requirements: A Must for Banks
In Switzerland, banks are required to maintain minimum liquidity levels in accordance with international standards set by Basel III. The Liquidity Ordinance sets out the quantitative and qualitative requirements for liquidity coverage, with a focus on high-quality liquid assets that can be easily sold or used to meet short-term obligations.
Liquidity Ordinance (LIQ)
- Sets out the quantitative and qualitative requirements for liquidity coverage
- Focuses on high-quality liquid assets that can be easily sold or used to meet short-term obligations
Group Supervision: A Key Component
The Swiss Financial Market Supervisory Authority (FINMA) is responsible for supervising financial groups, which are defined as two or more companies operating in the financial sector. FINMA reviews the group’s organizational structure, internal controls, risk management, and capital adequacy to ensure that it meets regulatory requirements.
FINMA Responsibilities
- Supervises financial groups
- Reviews organizational structure, internal controls, risk management, and capital adequacy
Systemically Important Banks: An Extra Layer of Supervision
Switzerland has designated five systemically important banks (SIBs), which are subject to additional supervision by the Swiss National Bank (SNB) and FINMA. These institutions are required to maintain higher levels of capital adequacy, liquidity, and risk management practices.
SIB Requirements
- Higher levels of capital adequacy
- Liquidity requirements
- Risk management practices
Banking Activities: A Closer Look
In Switzerland, various banking activities are governed by specific regulations. Mortgage lending is regulated by the Swiss Bankers Association’s guidelines on minimum requirements for mortgage financing. Consumer credit is subject to the Consumer Credit Act, which aims to protect borrowers from overindebtedness. Investment services are governed by the Financial Services Act, while payment services and e-money providers must comply with existing financial market regulations.
Banking Activities Regulations
- Mortgage lending: Swiss Bankers Association guidelines on minimum requirements for mortgage financing
- Consumer credit: Consumer Credit Act (protection from overindebtedness)
- Investment services: Financial Services Act
- Payment services and e-money: Existing financial market regulations
Conclusion
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Switzerland’s banking regulatory framework is designed to ensure stability, security, and protection for its citizens. By understanding these regulations, banks can operate effectively in the Swiss market, providing a range of financial products and services to their customers.